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HomeCOVID-19: Proposal to expand the Danish Travel Guarantee Fund – updated

COVID-19: Proposal to expand the Danish Travel Guarantee Fund - updated

26. March 2020

As a consequence of COVID-19, the travel industry is under a lot of pressure and airlines are forced to cancel flight after flight. The Danish government has adopted a scheme for the travel industry as an attempt to protect the travel providers’ economy. In this connection, the Danish Government has introduced an amendment to the Danish Travel Guarantee Fund Act in order to enable the Danish Travel Guarantee Fund to cover travel providers’ reimbursement expenses related to travels canceled due to the COVID-19 situation. The Danish Travel Guarantee Fund scheme on extraordinary situations has been passed without amendments and entered into force on 6 April 2020.

(Updated on 20 april 2020)

The proposal to secure reimbursement in extraordinary situations

The Danish Travel Guarantee Fund is established in order to provide assistance to travelers in case of the travel provider’s bankruptcy, but the Danish Government intend to expand the purpose to cover extraordinary situations, including the current situation caused by COVID-19.

The Travel Guarantee Fund will then be able to reimburse travelers who have purchased a travel package from a travel provider registered with the Travel Guarantee Fund, who have chosen to use the Danish guarantee scheme, which has not gone bankrupt and is affected by extraordinary circumstances. If the travel provider has already repaid the traveler, the travel provider can receive reimbursement from the Travel Guarantee Fund.

In the current Danish Travel Guarantee Fund Act, a guarantee provided in accordance with the rules of the country within the EU/EEA area where the travel provider is established replaces the guarantee provided under the Danish Travel Guarantee Fund Act. It follows from the preparatory work to new amendment, that reimbursement in relation to extraordinary circumstances is reserved for travel providers who have provided a guarantee in accordance with the Danish scheme set out in the Danish Travel Guarantee Fund Act.

The trade association for travel providers in Denmark (“Rejsearrangører i Danmark”) has argued that the reimbursement scheme should also be available for travel providers that has provided guarantees in other EU/EEA member states as long as such travel providers are members with the Danish Travel Guarantee Fund and contributes to the Danish Travel Guarantee Fund by the paying the mandatory fees.

Since the amendment has not yet been finalized and adopted by the parliament, the legal position may be changed in the final amendment.

A new fund for extraordinary situations

The amendment sets up a separate fund for extraordinary circumstances from which payment of reimbursement will be deducted.

In the proposed amendment, the Danish Minister for Industry, Business and Financial Affairs is granted authorization to decide when the fund for extraordinary situations must be activated. In this connection, the Danish Minister for Industry, Business and Financial Affairs lays down the more specific provisions on which exceptional situations can be covered, including the period for which the coverage applies.

It is clear that the purpose of the amendment first and foremost is to cover the current COVID-19 situation.

Contributions and repayment to the new fund

The Travel Guarantee Fund will receive access to a state guarantee of DKK 1.5 billion to ensure that the fund has liquidity to meet requirements for reimbursement.

Once the fund has been activated by the Danish Minister for Industry, travel providers has to pay a wealth-building contribution to the fund. The contribution is determined by the board of the Travel Guarantee Fund as a percentage of the travel providers’ yearly revenue.

After the Travel Guarantee Fund has reimbursed a traveler, the Travel Guarantee Fund will enter the traveler’s original claim against the travel provider. The travel guarantee fund’s claim against the travel provider will be reduced proportionately as the fund receives the wealth-building contributions to finance reimbursements.

To ensure that travel providers who have benefited from the scheme do not subsequently initiate measures to avoid or reduce their payment of the wealth-building contribution, the travel provider will have to repay the full amount the Travel Guarantee Fund under specific circumstances. These circumstances include when the travel provider deletes its registration in the Travel Guarantee Fund, when the travel provider agrees to another guarantee scheme and when the travel provider restricts its activities so that revenue falls below 50 per cent compared to 2019.

Finalizing the proposed amendment

The proposed amendment was introduced on 24 March 2020 and it is scheduled to be examined and finalized by the parliament on 26 March 2020. The amendment will enter into force as soon as the EU Commission as confirmed that the scheme provided by the amendment complies with the state aid rules.

Updated: The Danish Travel Guarantee Fund scheme on extraordinary situations has been passed without amendments and entered into force on 6 April 2020.

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